Railroad Pipedream: Investments Upstate
Across the country, investment in freight railroads has started to increase, reversing the reduction in trackage and disinvestment in equipment seen in the decades following the development of the Interstate Highway network. As noted by the Wall Street Journal, “once a dying industry, railroads have made a strong comeback and are poised to become busier places in the years ahead. Forecasts for freight growth are substantial, prompting railroads to plan capacity additions.” According to one analyst “rail activity could possibly even double by the midpoint of the century. North American rail-freight rates would continue to be the lowest or one of the lowest in the world, and the industry would finance most or all of its capital requirements without public support.” According to another, “the public-sector financial situation will actually be an advantage for freight rail: Highways are not being funded, and the prospects are dim in that arena unless taxes are increased [which in turn raises the cost of trucking, which also helps the rails].”
Somehow, however, all this activity has bypassed New York State. Take the National Gateway project, a public-private partnership. “The National Gateway project will improve the flow of rail traffic throughout the nation by increasing the use of double-stack trains, creating a more efficient rail route that links Mid-Atlantic ports with Midwestern markets.” The project is expected to create 50,000 jobs, is expected to cost $842 million in federal and state funds and $395 million in private funds, and “is supported by a broad and diverse group of 336 public and private sector organizations and individuals, including Big Lots!, UPS and The Limited.” And unlike subsidies for individual companies, the preferred form of “economic development” in New York, this infrastructure improvement will continue support job creation into the future. The project is described in this video. Projects are located in Ohio, West Virginia, and Virginia and North Carolina. Not in New York and New Jersey, whose port will thus NOT be linked by a more efficient rail network to Midwestern markets. Why not?
Someone might ask that question to Norfolk Southern, Canadian Pacific and CSX, the three major railroads holding New York and New Jersey’s major rail lines. I would expect the answer would have something to do with taxes. As noted by the New York State Rail Plan, while freight railroads pay property taxes “competing modes of freight transportation generally do not pay real property taxes on major portions of the transportation infrastructure that they use. For example, publicly owned, built, and maintained highway; airport; and waterway facilities typically are not subject to such local taxes.”
And New York’s taxes are high. According to the 2007 Census of Governments, New York’s total state and local government tax burden was 14.5% of its residents’ personal income that year, and while its state taxes were slightly above average as a share of income, its local taxes were nearly double at 7.7% of personal income compared with 4.4% nationally. In New York City, where the tax burden is highest, an average property tax burden combines with virtually unique local business and personal income taxes, but in the rest of the New York state the result is mostly high property taxes. Even in Upstate New York, where the tax burden is lowest (but public services provided downstate are often not available), the property tax burden was 4.2% of personal income for urban counties and 4.9% of income for rural counties, compared with a national average of 3.2%. (Property taxes as a share of property values are even higher, due to the low property values as a share of income Upstate).
Local officials are certainly reluctant to impose such burdens on residents. Businesses can threaten to move across the town or county line. So infrastructure, including freight railroads, is an obvious target to the extent that assessments can be gamed, and as a result, according to the state rail plan, “property taxes on railroad property in New York State have been among the highest in the nation. The state's tax structure actually discourages -- rather than encourages -- greater investment by the private railroads in their infrastructures. As a result, it often made sound business sense to remove existing track or sell off the rail lines to short line railroad companies if the lines were low density to avoid local real property tax levies.”
According to this document, New York State is one of the few states that allow different tax rates for different types of property, “which generally leads to higher property tax levies imposed on railroads.” The tax, however, has a ceiling based on determined by “the full value of railroad property used for transportation purposes, minus depreciation.” The greater the depreciation, the lower the ceiling and the lower the tax, the greater the investment, the higher the ceiling and the higher the tax. The ceiling is also adjusted for the profitability of the railroads. This is a “slow the decline” policy that shifts that tax burden from weak, declining railroads to strong, expanding (in other states) railroads.
By tearing out two of the four tracks on the old New York Central mainline from Croton to Buffalo, and one of two tracks of the old West Shore line (now called the River Line) from Albany south, Conrail and then CSX degraded the infrastructure – and cut their tax bill. By making the old Erie Railroad one track, the same was accomplished by or for Norfolk Southern. Signal improvements have been few on these lines.
New York, however, has been willing to cut property tax deals and provide exemptions to prevent the abandonment of rail lines or to encourage the revival of lines that have been abandoned. Over time, the taxation of railroad right of ways has become limited, ironically, to the most important parts of the state’s rail infrastructure, as noted by this map. “Any reduction to local real property taxes likely will have a positive effect on future capital infrastructure investment decisions of many freight railroads” according to the state rail plan. “The goal is to identify positive incentives for private investment in freight rail infrastructure and services.”
There are two arguments against making the state’s major rail routes tax exempt. First, the communities along the way generally receive no benefit from trains passing through without stopping, and their local governments need the money. And second, the railroads are monopolies, whereas any motor vehicle can use the roads and the ships and airplanes of a variety of carriers use the ports and airports. Even so, the state might consider more radical tax reform in exchange for additional investment and usage reform by the railroads. While not affordable for particular communities, such reforms would be affordable for the state as a whole – and rail infrastructure benefits the state as a whole.
What I suggest is this. Any mainline infrastructure put in place after the present – tracks, signals, etc. – should be exempt from local property taxes. There would no longer be a tax disincentive to add tracks or improve signals, and local property tax collectors would not lose anything they were already getting.
And the State of New York should pay the property taxes on the land the railroad sits on, instead of the railroad having to do it, if several criteria are met. Investments are made to restore the capacity of the railroads. And the railroad that owns the tracks operates them as a common carrier, with other railroads permitted run trains on them for a reasonable fee at times when the railroad that owns the tracks isn’t using them, and does not need to take them out of service for maintenance. This is hardly a radical idea. Railroads make these sort of deals with each other, called “trackage rights,” all the time, so the railroads that maintain rights of way are used to negotiating charges, often overseen by regulatory authorities, for other railroads to use them.
The State should at least find out what investments the railroads, and CSX in particular, are willing to make in exchange for tax exemptions. Would Norfolk Southern be willing to two-track the former Erie Railroad from Suffern to Binghamton, with perhaps some state support? Would CSX be willing to two-track its River Line (the former West Shore railroad) from Albany to New Jersey, identified by the Port Authority as a bottleneck?
Another issue, one coming out of the Obama Administration’s early interest in high-speed rail, is the conflict between freight traffic and passenger rail. Rather than pay for entirely new, separate, high-speed passenger lines, the Administration proposed upgrading existing freight lines to allow more and faster passenger service. While federal budget cuts have called the future of high-speed rail into question, the possibility of better train service in the Empire Corridor from New York to Buffalo, with connections to Toronto and Montreal, did spark the interest of New York Governor Cuomo.
But mixed high speed passenger and freight service drew opposition from freight railroads. According to the Wall Street Journal article linked above “passenger service can literally drive freight traffic off the railroad; look no further than the Northeast Corridor for an example. What was a vital and busy north-south freight line has essentially been eliminated. The amount of money being proposed for passenger rail is far short of what is needed for a first-rate, European-type passenger network. We are trying to do high-speed rail on the cheap and run a real risk, by ducking very real capacity issues, of doing serious harm to the rail freight system.”
The existing New York rail line that combines passenger and freight service most intensely is the CSX former New York Central mainline, once four tracks and now two, running across the state from Albany to Buffalo. According to the state rail plan “the main line between Albany and Buffalo is one of CSXT’s highest volumes on its entire system, with much of its freight traffic (approximately 55 trains per day) traveling during daytime hours. Current operating speeds up to 79 mph are allowed by the signal system for this critical freight and passenger rail shared-use corridor. For higher allowable passenger train speeds, signal improvements become increasingly important west of Albany.” Trains can reach 110 mile per hour from Poughkeepsie to Albany, where there are better signals and fewer freight trains.
Confronted with this opposition, some have advocated creating entirely new high-speed railroads for passenger service, as in Europe and Asia. But to me this is exactly the wrong approach. The existing lines run through city centers, where passenger railroads can provide downtown to downtown service. Having rail stations far out of town, like airports, would eliminate this advantage and contradict one of the goals of improved rail transportation – urban revitalization.
In contrast most rail freight users, whether heavy industry, mega-warehouses, or multi-modal railports where containers and trailers are shifted between trains and trucks, have left city centers. That is where almost all new such operations will be located, because that is where land is available. Under the circumstances, it is clearly the freight railroads and not the passenger railroads that should move, and with so many abandoned railroads in New York State there are plenty of places for them to move to.
Downstate, I had suggested that the State of New York could drive a tunnel from Ridgefield, New Jersey to the Bronx, and the major eastern railroads work together to put a railroad in it, a railroad that they would operate jointly and all use. Let’s expand the pipedream to Upstate New York.
The State of New York could acquire the right of way of the former West Shore Line from northwest of Albany to south of Rochester, and the former Lehigh Valley Line from there to Buffalo, grade it and build overpasses for a fully grade-separated two-track freight-only railroad capable of handling double stack and TOFC freight trains. This would be turned over to CSX in a very long-term lease for a nominal fee. In exchange for this brand new tax-exempt right of way, CSX could be required to lay down tracks and install signals on it. The CSX tracks and signals would be sufficient for heavy train traffic traveling at more than 60 miles per hour, and compliant with current national weight standards.
As part of the deal, CSX would also be required to turn over its existing right of way – the former New York Central water level route – to the State of New York, for the exclusive use of higher speed passenger rail. So the issue of conflicts between high-speed rail and freight rail would be eliminated. There would be a two-track, high-speed freight railroad running across the state and a separate two-track passenger railroad running across the state some distance away – on the other side of the Mohawk River for example. That is what CSX said it wanted in exchange for allowing high-speed rail. Separate tracks at least 30 feet away from the freight tracks, separated by a fence.
High-speed freight service would require some four-track sections to serve as “exits,” so trains could pull off the main line without slowing trains behind. Existing rail-served customers along the existing rail infrastructure could be served by north-south lines off these “exits.” These exits would be part of the plan, and would include high speed switches to limit the delay for following trains.
Think of this new freight line as the equivalent of adding two lanes to the I-90 portion of the New York State Thruway, but for trains rather than trucks. With trains moving at 60 miles per hour or more, and going through an unobstructed tunnel to the East of Hudson area of Downstate New York without ever using the same tracks as passenger trains, intermodal freight movement by railroad would be time-competitive with shipping entirely by truck. And much less costly in labor and energy, and much less susceptible to disruption and delay due to traffic jams.
So how much would the new freight line cost? If New York State tried to do it the cost would probably be unaffordable. People have begun to understand just how much more infrastructure investments cost in the U.S. in general, and New York in particular, compared with “socialistic” heavily unionized Europe, as this article shows.
But how much should it cost -- just the part the State would pay for, the acquisition and grading of the right-of-way and dropping down a series of overpasses – which could be standardized and pre-fabricated? Probably not too much.
Take the land, for example. Imagine the right of way for the two-track railroad was 50 feet wide. That’s six acres of land per mile. What does raw land upstate go for in this economy, with much of it in former railroad rights of way with restricted uses? At $10,000 per acre, that’s $60,600 per mile or $17.3 million for the entire route from Albany to Buffalo. Double it and that’s $34.6 million. Pay the enormous sum (up there) of $30,000 per acre, or assume additional costs due to reverse condemnation claims by some nearby landowners (making the state buy more on the grounds that additional land near the new right-of-way was being made unusable by the improvement) and the removal of an occasional building, and you are up to perhaps $52 million. This would be a one-time only expenditure that could be bonded, and not much compared with the cost of maintaining the existing state transportation infrastructure each year. There would be no such maintenance cost on a privately run railroad, something politicians take for granted.
CSX, perhaps with federal help that it solicits, would be asked to install the tracks and signals along the line, with the state perhaps kicking in some money. Remember, the new line would have no taxes on the new equipment, and the state would own and pay taxes on the land, a considerable saving for the railroad. The State of New York could also solicit federal help for the overpasses, but as on the Second Avenue Subway the federal government is unlikely to provide more in funding that the added costs due to federal regulations and delays, so it probably would not be worth it.
As in the case of the downstate tunnel discussed in the previous post, for the proposed improvements Upstate to actually be a pipedream rather than an impossibility, all the bullshit would have to be avoided. There would have to be no EIS, and no government contractors and consultants. The State would pay the railroad a fixed fee to grade the land and install overpasses, and let them do the work mostly with their own fairly paid workers. I don’t see why this new major high-speed rail freight line should cost New York State more than $1 billion.
What about high speed passenger rail? With the New York Central mainline in state hands, Empire Corridor service could be operated and the line maintained by Amtrak, Canadian National, a private passenger rail operator such as Virgin, or whoever. Perhaps Amtrak could maintain the line but other railroads, including Canadian National and New York State, could use it for additional service. Amtrak makes money on the Northeast Corridor line, the only line it owns and maintains itself.
Just getting the freight trains out of the way, and having fewer trains spaced more widely with less potential to get stuck behind each other, would probably speed passenger trains along the line. Incremental improvements could be made as funds became available – straightening any tough curves, for example. As existing stretches of track came due for replacement, they could gradually be replaced by tracks capable of supporting higher speeds. (Electrification using MetroNorth’s under-running third rail system, a far more costly improvement, could be deferred to later).
One substantial improvement could be to the signal system. According to the state rail plan “to increase allowable operating speeds above 79 mph there would be a need, per FRA regulations, to install a state-of-the-art Positive Train Control (PTC) system based on a real-time, moving block.” New railroad signal systems are extremely expensive, but technological advances that have happened in the past few years cause me think that significant signal improvements for rail lines running in above the ground are possible for far less money and in far less time than railroads and rail planners would assume.
Railroad signal systems need to identify the location of trains, and then send signals to those operating the trains to let them know if they need to slow or stop to avoid a collision. Traditional signals identify the approximate location of trains using electrical circuits created by the steel train wheels and steel rails, and send information to the operators via the equivalent of stoplights. Cab signal systems send that information to the cab of the locomotive via radio signals. Railroad signal systems contain extensive electrical equipment along the right-of-way, and are very expensive.
Today, however, you can buy a camera that identifies its precise location based on GPS signals sent from satellites. You can buy a watch that does the same. Inexpensive GPS systems for private automobiles pinpoint locations so accurately they can tell you when to turn. Cell phones send data to and from hand-held devices to computer servers located a distance away, via cell phone towers located all over the country. And the military has pilotless airplanes controlled by pilots located on the other side of the world.
One would think, based on this, that a signal upgrade sufficient to operate a railroad could be created by the GPS and cell phone companies, using their existing infrastructure and, perhaps, a few new cell towers in areas with poor coverage, if they were to seek out that market. All that would be required to supplement it would be perhaps four traditional signals per track at each station or interlocking (set of railroad switches), for use when one track was used for service in both directions, as the other one was being maintained or repaired. Otherwise, for a new signal system at a fraction of the cost, perhaps all that is required is for the railroad to hire Google, Apple, Garmin, TomTom or OnStar instead of Railworks or Siemens. Instead of a multi-billion dollar project, you have an I-Phone app.
Whereas the high-speed freight railroad goal could be to have trains cruise at 60 miles per hour or more from Buffalo or some other points to the mouth of the proposed freight tunnel, the high-speed passenger rail goal could be to get passenger trains in the Empire Corridor up to 150 miles per hour, the top speed of Amtrak’s the Acela Express, along the entire route north of Poughkeepsie.
Of course for such a major endeavor, New York State could use the support of an efficient, forward-looking national government. I don’t mean the one in Washington, I mean the one in Ottawa. Canada, which owns the Canadian National railroad, might be interested in a high speed rail triangle linking New York, Toronto and Montreal. It might even be willing to pay to run a single high speed track down the center of the Northway to complete the triangle.
There is one more question that needs to be answered about this pipedream. Why? Why do it? What would be the benefit in the short run, and what could be the benefit in the long run? My answer to those questions follows.
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